Royal Bank of Scotland has issued a 16.7 billion ($33.3 billion) mortgage-backed bond, the latest in a string of deals from UK banks after the Bank of England announced a plan to swap such debt for gilts, Reuters reports.
The issue follows similar deals from Lloyds TSB, which issued 11.5 billion of residential mortgage-backed securities (RMBS), and HBOS, with a 9 billion deal.
RBS’s deal, dubbed Greenock Funding No. 2 is split into 16 tranches, with 14 of them sized at 1 billion or the equivalent in euros. The bank has retained all of the tranches. The deal was part of the bank’s overall funding strategy, as reported.
The Bank of England in April announced a scheme that would allow banks to swap hard-to-sell asset-backed bonds for freely tradeable government bonds, in an effort to help free up their balance sheets.
Banks have faced problems in raising cash due to the credit crisis, which has disrupted key sources of funding including the interbank market and the securitisation market. However, some bankers and investors have started to become concerned that the ability of banks to pledge asset-backed securities as collateral to central banks is preventing the market from making a recovery.
And some central bankers say they are looking closely at the quality of the collateral pledged to them, with concerns about the level of credit risk they are being exposed to.